The Federal Circuit Solidifies The Future For Subsequent ANDA Litigation

In Teva Pharmaceuticals USA, Inc. v. Eisai Co., Ltd., the Federal Circuit addressed complicated subject matter jurisdiction issues in the context of a declaratory judgment (DJ) action that was brought in accordance with the Hatch-Waxman Act by a subsequent ANDA filer. The court determined that the DJ action should proceed, even though the patent owner could not have brought an infringement action to enforce the challenged patents. The court’s decision may encourage DJ actions by other subsequent ANDA filers, with the potential to hasten the market entry of more generic drug products.

The Aricept® Patents

The Eisai patents at issue relate to donepezil, which is approved for the treatment of Alzheimer’s disease and marketed as Aricept®. Eisai listed five U.S. patents in its Orange Book listing for donepezil. One patent (U.S. 4,895,841) expires November 2010. The other four (U.S. 5,985,864; U.S. 6,140,321; U.S. 6,245,911 and U.S. 6,372,760) expire in 2016, 2018 and 2019. It is those four patents (the DJ patents) that are the subject of Teva’s DJ action.

Prior to the litigation at issue, Eisai filed statutory disclaimers of two of the four DJ patents, the ’321 patent and the ’864 patent, making them forever unenforceable. Nevertheless, all four DJ patents remain in the Orange Book listing for donepezil.

The Aricept® ANDA Landscape

Ranbaxy filed the first Abbreviated New Drug Application (ANDA) for Aricpet® in 2003. Ranbaxy filed a Paragraph III certification for the ‘841 patent, agreeing to delay marketing of its generic product until that patent expires in November 2010. Ranbaxy filed a Paragraph IV certification for the DJ patents, alleging that they are invalid or would not be infringed by Ranbaxy’s product.

As the first ANDA filer, Ranbaxy is entitled to a 180-day period of exclusivity that will commence (i) when Ranbaxy begins to market its product or (ii) when the DJ patents are adjudged to be invalid or not infringed, by operation of 21 USC § 355(j)(5)(B)(iv).

One of Teva’s goal in bringing the DJ action at issue is to obtain a judgment that will trigger Ranbaxy’s 180-day exclusivity period, so that Teva can enter the market after that period expires.

In 2005, Teva filed an ANDA that initially included the same Paragraph III and Paragraph IV certifications as Ranbaxy’s filing, but Teva amended its ANDA to make a Paragraph IV certification for the ‘841 patent.

In 2007, Teva filed a separate ANDA for a different generic donepezil product, acting through its Gate Pharmaceuticals division. At first, the Gate ANDA included Paragraph III certifications for all of the Eisai patents, but the Gate ANDA was amended to make Paragraph IV certifications for all patents instead.

Eisai’s Infringement Litigation Against Teva

The Hatch-Waxman Act makes Paragraph IV certifications acts of infringement under 35 USC § 271(e)(2). In response to the Teva and Gate ANDA filings, Eisai sued Teva for infringement of the ’841 patent (only). By bringing suit in accordance with the Hatch-Waxman Act, Eisai also secured a 30-month stay that prevented the FDA from approving the Teva and Gate ANDAs for a 30 month period that expired in April 2008.

During the litigation, Eisai obtained a preliminary injunction that blocks Teva (and Gates) from marketing a donepezil drug product before the ‘841 patent expires. Teva stipulated that its donepezil products infringe the ‘841 patent, but did not stipulate to validity or enforceability. This litigation is ongoing.

Thus, for the time being, Teva is prohibited from entering the market by both the preliminary injunction surrounding the ‘841 patent and Ranbaxy’s as yet untriggered 180-day exclusivity period.

Teva’s DJ Action

Teva brought the DJ action at issue in May 2008. In the action, Teva sought a declaratory judgment that a donepezil drug product covered by the Gate ANDA would not infringe the DJ patents.

After Eisai moved to dismiss for lack of subject matter jurisdiction, Eisai and Teva entered into a covenant-not-to-sue with regard to the two DJ patents that Eisai had not disclaimed (the ’911 patent and the ’760 patent). Between the statutory disclaimers and this agreement, Eisai could not enforce any of the DJ patents against Teva. Still, Teva can not enter the market until Ranbaxy’s 180-day exclusivity period has run, and that clock has not even started ticking.

The district court dismissed Teva’s DJ action on two alternative grounds:

by finding a lack of subject matter jurisdiction because there was no “case or controversy.”

by refusing to exercise its discretion to hear a DJ action.

The Jurisdictional Issue

The Federal Circuit cited the Supreme Court’s decision in MedImmune, Inc. v. Genentech, Inc., for its discussion of the Constitutional requirements for a “case or controversy”:

[S]uch a controversy exists when the dispute is “definite and concrete, touching the legal relations of parties having adverse legal interests.”

The court also explained that the dispute must be:

“real and substantial”

of “sufficient immediacy and reality to warrant issuance of a declaratory judgment” and

the plaintiff’s injury must be “fairly traceable” to the defendant’s conduct

Caraco presented facts quite similar to those at issue in Teva v. Eisai. In Caraco, the court held that a subsequent ANDA filer suffered from a judicially cognizable injury-in-fact when an untriggered 180-day exclusivity period of the first ANDA filer prevented market entry for an indefinite time. The court found that the injury was “fairly traceable” to the defendant patent owner, because its decision to list a patent in the Orange Book created an “independent barrier” that prevented the generic drug manufacturer from entering the market. The court noted that the injury would be redressed by a favorable decision, because a judgment of non-infringement or invalidity would trigger the first ANDA filer’s 180-day exclusivity period, after which the subsequent ANDA filer could enter the market.

Janssen

Janssen presented similar facts, with one important twist. In Janssen, the DJ plaintiff had “stipulated to the validity, infringement, and enforceability of another patent listed in the Orange Book for the same drug.” According to the Federal Circuit, this meant that the “injury” of being excluded from the market was not “fairly traceable” to the patent at issue in the DJ action, because the other patent represented an independent hurdle to market entry.

Janssen also decided that the 180-day exclusivity period awarded to the first ANDA filer does not in and of itself create a “case or controversy” between a subsequent ANDA filer and the patent owner. Rather, that delay of market entry derives directly from the intended operation of the Hatch-Waxman Act, and so is not a judicially cognizable injury.

Reading Caraco and Janssen together, and applying them to the facts at issue in Teva v. Eisai, the Federal Circuit determined that there was a “case or controversy” sufficient to support jurisdiction. The court noted that, as in Caraco, a decision on the merits for Teva would remove the DJ patents as a barrier to Teva’s ability to market a donepezil drug product. The court also noted that, unlike Janssen, Teva had not stipulated to the “validity, infringement, or enforceability” of any donepezil patents listed in the Orange Book that independently could prevent Teva’s market entry.

(Although Teva was subject to a preliminary injunction relating to the ‘841 patent, the court noted that the injunction was preliminary, and might not survive the underlying litigation. Moreover, the DJ patents have much later expiration dates than the ‘841 patent.)

The Judicial Discretion Issue

Teva argued that district courts must hear all DJ actions brought under the Hatch-Waxman Act, as long as the Constitutional subject matter jurisdiction requirement is met. The Federal Circuit rejected this argument, finding that the statute cited by Teva, 35 USC § 271(e)(5), “speaks only to the power of a court to decide a case, not the prudence.” That is, while the statute “clarifies the maximum extent of a court’s jurisdiction, it does not govern how the district court may exercise its discretion.”

In exercising such discretion [under the Declaratory Judgment Act], the district court must typically consider the usefulness of the declaratory judgment remedy, the fitness of the case for resolution, and the purposes of the Declaratory Judgment Act.

The Federal Circuit found that it was an abuse of discretion to refuse to exercise jurisdiction over Teva’s DJ action, because of “[a]t least two errors [that] infect the district court’s exercise of discretion.”

The district court improperly considered its (erroneous) subject matter jurisdiction decision when making its “discretionary decision of whether to exercise jurisdiction over the case.”

The district court erroneously determined that Teva’s filing of multiple ANDA’s under multiple names “amounted to thinly disguised, improper gamesmanship.”The Federal Circuit noted that the two ANDA’s related to different drug products, and the FDA had suggested that they be filed under different names to minimize consumer confusion.

In summary, the Federal Circuit found that the court should have heard the DJ action because “a declaratory judgment would settle the legal relations in dispute and afford relief from uncertainty and insecurity.”

The Future for Subsequent ANDA Filer Litigation

The “case or controversy” holding in Teva v. Eisai seems to follow directly from the decision in Caraco, but the Teva decision provides additional guidance on the judicial discretion issue. Although the Federal Circuit was careful not to require courts to hear all Hatch-Waxman DJ actions, and even left the door open for the district court to again refuse to hear Teva’s case if it provides different reasons for doing so, the decision indicates that the Federal Circuit will closely scrutinize such exercises of judicial discretion.

I generally agree with the court’s legal analysis and its determination that generic drug manufacturers like Caraco and Teva can present cases that are suitable for resolution by DJ actions. But, I find myself wondering if the “encouragement” to exercise judicial discretion to hear such DJ actions stems from public bias against pharmaceutical companies, and reflects a sentiment that generic drug manufacturers serve the public interest when they challenge innovator patents to hasten market entry of their own, cheaper drug products. In any event, this decision may lead to more litigation by subsequent ANDA filers, which could either bring more generic drug products to market more quickly, or strengthen any challenged patents that survive litigation.

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Declaratory Judgement jurisprudence presents two contradictory legal precedents that have been set aside by the courts. One is Caraco Vs Forest lab and the other one is Janesson vs Apotex. The Caraco case presents judicially created article III controversy despite Forest labs issues a covenant not sue declaration. The Caraco case precludes the entry of generic companies to make available the low cost generic version to the public and hence presents a potential cognizable injury to the generic company. The Janesson vs Apotex does not present article III controversy as Apotex stipulated to the validity of the product patent. The Eisai vs Teva presents yet another article III controversy as the situation in this somewhat resembles the Caraco case. Despite statutory disclaimers have been issued against two patents and Eisai declared covenant not to sue on the remaining two patents, the listing of patents in the Orange Book proved impending blocking mechanism for the generic entry unless court verdict prevails upon the Orange Book listing patents as non-infringing or invalid. Hence, the situation is bit different from the aforesaid cases.